The pharmaceutical industry has remained largely undeterred by the event of Covid-19, mainly because of nature of the products that it manufactures. It falls into the category of essential services declared necessary during the pandemic. Therefore, operations within this sector were not brought to an abrupt halt during the lockdown phase, as was the case with majority of other sectors.

This is evidenced by the stability in the profitability of major pharmaceutical companies, including GlaxoSmithKline Pakistan Limited (PSX: GLAXO). The company announced its annual results for CY20 earlier this week, and it has not disappointed its shareholders, to say the least.

The severity of Coronavirus hit the country towards the end of the first quarter of CY20, therefore, the fall in topline during 1QCY20 year on year is a result of the general business environment in the economy with respect to stabilization policies under the IMF programme. In addition, the currency devaluation led cost of production to increase as the pharmaceutical industry relies heavily on imports of Active Pharmaceutical Ingredient (API). This is also evident by the fact that cost, as a share in revenue was highest during the first quarter.

By the second quarter of CY20, the situation of Covid-19 in the country turned grave as lockdown ensued; 2QCY20 saw the lowest sales at Rs 7.7 billion. In addition to the population avoiding hospital visits, and OPDs shutting down for non-covid related illnesses, the lower sales were also, in part, due to discontinuation of Ranitidine (Zantac). Yet, bottom line doubled quarter on quarter owing to lower expenses related with promotions and sales force visits to health professionals among other decreases in operational costs.

The third quarter saw business returning to usual, as revenue not only improved year on year, but also quarter on quarter. The company adapted to the new normal, while the relative stability in the otherwise volatile exchange rate provided some relief with respect to cost. Expenses related with distribution were also contained as engagements with relevant people of the industry transferred to virtual mediums.

However, profitability in the last quarter seems to be largely stemming from other income. GSK’s revenues during CY20 remained lower than CY19 (-4 percent YoY) with CY20 ending in nearly Rs 3.4 billion profit - the highest seen in a decade in value terms with earnings up by 11 percent year-on-year. However, with severity of the situation returning, it is too early to predict how the company performs in CY21.